Forging America: The History of Bethlehem Steel - Chapter 8

Company executives projected the industry would save $2 billion over the life of the contract. For their part, union employees got increased benefits for laid-off workers, some of their lost pay was offset by company stock, and management promised to use the contract savings to rebuild the industry.

''It didn't give our laid-off people enough,'' a dejected O'Brien said after the vote. ''There was no real guarantee of putting people back to work.''

Despite the deep cuts, the union did not budge on the past practices clause, or Clause 2B, that was written into the 1956 contract. The clause barred the company from combining jobs to reduce the number of workers needed to do a task. Teams of high-paid union workers would continue to do jobs that one nonunion worker was doing at foreign plants or in domestic mini-mills.

Though steel executives couldn't rid themselves of Clause 2B, the salary and benefit concessions gave them the ammunition they needed. It was time to go to Washington.

Trautlein planned to wage his fight through the U.S. International Trade Commission, by filing a petition of injury under the provisions of the Fair Trade Act. The commission holds hearings on claims of unfair trade and has the power to recommend remedies, if necessary, to the president. Best of all, the Fair Trade Act required that the process be completed in eight months. If Trautlein and his allies won their case with the commission, Reagan would have to decide on tariffs or quotas in the fall of 1984, as he was campaigning for a second term.

Trautlein was convinced it would be easy to prove that foreign countries were ''dumping'' excess steel in America by selling it for less than it cost to make, a clear violation of international trade laws passed in 1976.

But a battle against dumping meant jumping into a sticky political arena of international relations. The United States had sought trade quotas before, but enforcement had always been lax, partly because of international politics. If the United States put restrictions on foreign steel, then it risked foreign countries putting restrictions on American goods.

Opposition from Japan and Germany was expected, but Bethlehem also found foes among some of its best customers. Caterpillar and General Motors opposed new trade restrictions, because they would drive up steel prices. Even U.S. Steel, the nation's top steel producer, refused to back Trautlein, arguing that his plan could upset voluntary restrictions that some foreign countries agreed to only a few years earlier.

But Bethlehem Steel's controversial leader was undaunted, and he had allies. Most of the nation's other steel companies were with him, as well as the union. Outside union headquarters at Van Bittner Hall on Lehigh Street in Bethlehem was a 45-foot beam with the words, ''Stop Illegal Steel Imports,'' painted on it.

On this issue, the union chose to look past its disdain for Trautlein. In January 1984, he and the union filed a petition with the International Trade Commission on behalf of the steel industry.

''There is absolutely no free trade in steel,'' Trautlein said in announcing the petition during a news conference at the Hotel Bethlehem, a landmark that was built at the urging of Bethlehem Steel Corp. founder Charles M. Schwab. ''Damages caused by dumped and subsidized imports are undermining (the industry's) very foundation.''

With international Steelworkers union President Lynn Williams at his side, Trautlein estimated that Bethlehem had lost nearly $2 billion in revenue in four years to dumped steel, and he was asking the trade commission and Reagan to limit imports to 15 percent of steel consumed in America. Williams was quick to add that the union had done its part by taking concessions.

Later, at hearings by the International Trade Commission, two commission members questioned whether the steel industry was merely using foreign trade as a convenient excuse for its own high wages, outdated plants and unrealistic projections of increased demand.

''Imports do not come close to being the most important problem,'' said Paul Stern, a trade commission member appointed by President Jimmy Carter. ''No. 1 is the general decline in demand.''

Nevertheless, by a 3-2 vote, the commission found in favor of Trautlein's petition, and Reagan  further nudged by a letter-writing campaign orchestrated by Bethlehem Steel  agreed to limit imports to 18.5 percent by striking ''voluntary'' deals with several foreign countries. Trautlein didn't get everything he wanted, but Reagan's decree was a huge victory for American steel. To those who opposed the petition, it was a gross violation of free trade.

The trade deals slowed the stream of imports for a while, but they were never stringently enforced, and imports never dropped to 18 percent. It didn't take long for foreign countries to find loopholes. Countries that agreed to the voluntary limits, such as Japan, simply made it appear that the goods were coming from countries that struck no deal, such as Canada and Mexico. Others used clever labeling to skirt the restrictions.

William Tattersall, a longtime Bethlehem Steel attorney and manager of its state government affairs office who moved on to work for the International Iron and Steel Institute, had an overarching view of the world trade situation from his institute office in Belgium.

''The tariffs on finished product were higher than unfinished, so foreign companies would relabel a shipment of bicycles as steel tubing,'' Tattersall says. ''Or they'd label it from Mexico or Canada. All they did was alter the labels. The U.S. either didn't have the agents to monitor it, or they simply chose not to for political reasons.''